expenses Degree of Operating Leverage, Percent Change in Profit Ringsmith Company is considering two different processes to make its product-process 1 and process 2. Process 1 requires Ringsmith to manufacture subcomponents of the product in-house. As a result, materials are less expensive, but fixed averhead is higher. Process 2 involves purchasing all subcomponents from outside suppliers. The direct materials costs are higher, but fixed factory overhead is considerably lower. Relevant data for a sales level of 38,000 units follow: Process 1 Process 2 Sales $9,500,000 $9,500,000 Variable expenses 3,762,000 5,016,000 Contribution $5,738,000 $4,484,000 margin Less total fixed 3,621,095 1,360,540 Operating income $2,116,905 $3,123,460 Unit selling price $250 $250 Unit variable cost $99 $132 Unit contribution $151 $118 margin Required: 1. Compute the degree of operating leverage for each process. Round your answers to one decimal place. Use the rounded answers in subsequent calculations. Process 1 Process 2 2. Suppose that sales are 20 percent higher than budgeted. By what percentage will operating income increase for each process? Process 1 % Process 2 What will be the increase in operating income for each system? Round your answers to the nearest dollar Process 1 Process 2 $ What will be the total operating income for each process? Round your intermediate calculations and final answers to the nearest dollar. Use the rounded answers in subsequent calculations. Process 1 Process 2 3. What if unit sales are 10 percent lower than budgeted? By what percentage will operating income decrease for each process? Process 1 Process 2 What will be the total operating income for each process? Round your intermediate calculations and final answers to the nearest dollar. Use the rounded answers in subsequent calculations. Process 1 $ Process 2